James Gallagher

startups are one type of business

Published on April 20, 2020

I have been thinking a lot lately about how startups are only one type of business.

When I was young, I immersed myself in the Silicon Valley culture. I watched the television show Silicon Valley liberally, I was interested in company building, and I was always thinking about how the next novel idea could become a big thing.

What attracted me to the Silicon Valley approach to business is that the odds of success may have been low, but the rewards for succeeding were so high. While there were countless people who had struck out and had never reached success, there were a few who had been able to build something really cool and sell it to the world. I was hooked.

However, while this model of company-building sounds lucrative -- and provides great rewards -- those rewards are only available to people who can build something that can scale. That’s why so many startups are in tech: tech can scale quickly, but other types of businesses can not.

One thing that gets lost amongst the advice on building a “startup” is that there are other ways to build a company. You don’t need to think about it much to realize that your local supermarket is not a startup, neither the local tech IT firm that helps solve problems for other local businesses. These entities are businesses, but not startups.

Paul Graham has spoken about how what makes a startup a startup is growth. Startups need to grow, or they fail. I agree with this assertion, because tech startups are all about high-stakes games: the investment numbers are big, and they are so because the more money you raise, the more you can grow and scale your customer base. This, in turn, leads to more profits for investors.

It’s great to see that there is so much content out there on startups. Startups can make dreams come true. But many ideas are not fit for the startup model -- they do not, or cannot, scale as efficiently as “startups” demand. What happens to these ideas?

In some cases, people will just never start a company with the idea they have. If they cannot answer “how does this grow to 1 million customers”, or a similar growth-related question, then they may just forget about their idea entirely and continue. In other cases, people may start a business, only to later shut down because they have realized they can’t attain the massive levels of growth that investors are looking for.

These scenarios are both unfortunate. In fact, I would argue that they lead to a somewhat inefficient market -- there are great ideas floating around, but the people pursuing them have limited themselves by calling their company a “startup” and following traditional startup advice.

This is why I am increasingly interested in the idea of “indie makers” or “bootstrappers” who are focused on building sustainable businesses. These people could, potentially, build a billion-dollar business, but that is not their focus. Their focus is on building something people want, irrespective of the returns.

The only thing a business needs to do to be successful -- startup or not -- is to make something people want, according to Y Combinator. Everything else is just semantics.

Your local bar succeeds because they are doing something people want: providing an ambient atmosphere in which to drink (well, they would be succeeding, if not for the current crisis going on). Similarly, Facebook has succeeded because they are building a social media product that people want to use.

If you have an idea, you should not let starting a startup limit your ability to pursue that idea. You don’t need to start a startup. You can build your business independently. Then, if it turns out you are onto something, and need to scale up, you can, on your own terms.

This way, nobody is left with the impression that their business idea is flawed solely because it does not operate within the Silicon Valley idea of “growth”.

I think too many people see the idealism in startups -- the late nights coding, the venture capital deals worth millions -- and let that distract them from what matters: building good products. Good products don’t have to come from startups, no matter what VCs may say.

I know of many great tools that wouldn’t have existed if they were startups. They were solving a problem that was too small. Or they just wanted to build a cool tool, not necessarily a company. And that’s why it’s so important we look at other types of businesses.

If you have an idea, pursue it. If it turns out that it can scale rapidly, great -- maybe you can turn it into a startup. But, before you do so, consider whether “starting a startup” is really what you want to do. Maybe you’ll realize that there is another business model that works better based on your needs and long-term outlook.